Germany has activated the “alarm stage” of its emergency gas plan in response to the fall in Russian supply, but has been unable to allow utility companies to pass on rising energy costs to customers in the country. Europe’s largest economy.
Key points:
- The passage of Germany is largely symbolic, but it marks an important change
- Gas rationing, hopefully, will be avoided but cannot be ruled out, says Economy Minister Habeck
- The Kremlin says Russia “strictly fulfills all its obligations” to Europe
The measure is the latest escalation in a Europe-Moscow clash following Russia’s Russian invasion of Ukraine on February 24 that has highlighted the bloc’s dependence on Russian gas supplies and sparked a frantic search for sources of alternative energy.
The passage of Germany is a largely symbolic sign for businesses and households, but it marks an important change for the country, which has cultivated strong energy ties with Moscow since the Cold War.
Reducing gas flows this week sparked warnings that Germany could fall into recession if Russian supplies all came to a halt.
A poll on Thursday showed the economy lost momentum in the second quarter.
“We must not be fooled: the cut in gas supply is an economic attack on us [Russian President Vladimir] Putin, “Economy Minister Robert Habeck said in a statement.
Gas rationing is expected to be avoided, but it cannot be ruled out, Habeck said.
“From now on, gas is a scarce commodity in Germany … So now we are forced to reduce gas consumption, now already in the summer.”
Russia has denied that supply cuts were deliberate, with state supplier Gazprom blaming a delay in the return of service equipment caused by Western sanctions.
On Thursday, local time, the Kremlin said Russia “strictly fulfills all its obligations” to Europe.
Berlin will offer a € 15 billion line of credit to fill gas storage and launch a gas auction model this summer to encourage industrial users to save on gas.
The second “alarm stage” of a three-stage emergency plan means authorities see a high risk of long-term supply shortages.
It includes a clause that allows utilities to immediately pass on high prices to industry and households.
However, Habeck said Germany was not at this point, but that the clause could be activated if supply-side tightening and price gains persisted, causing power companies to sink further into the red.
“If this inconvenience becomes so great that companies can no longer stand it and fall, the whole market threatens to fall at some point, so a Lehman Brothers effect on the energy system,” he said, referring to the lapse of the US investment bank in 2008 that affected global financial markets.
The local utility association VKU called on the government to protect consumers with subsidies or risk utilities to bankruptcy due to low-income retail customers who did not pay.
Federal Network Agency President Klaus Mueller said it was possible for gas consumption prices to triple.
Germany’s move to Phase 2 had been planned since Gazprom reduced flows through the Nord Stream 1 pipeline to just 40% of capacity last week. (AP: Michael Sohn)
“If you extrapolate it, it depends a lot on how you heat, on how your building is built, but it can triple the previous gas bill,” he told RTL / ntv stations.
The move to Phase 2 had been planned since Gazprom reduced flows through the Nord Stream 1 pipeline across the Baltic Sea to just 40% of its capacity last week.
Data released on Thursday showed that Germany has imported 22% less natural gas during the first four months of 2022, but the cost rose 170% over the same period.
Faced with declining deliveries from its main supplier, Germany has been in Phase 1 since the end of March, which includes stricter monitoring of daily flows and a focus on filling gas storage facilities.
“The declaration of the alarm stage does not immediately change the fundamental status quo,” said German energy supplier E.ON.
It was important, however, that the government be preparing and taking steps to stabilize markets and gas supply, a statement sent to Reuters via email said.
Reuters
Posted 2 hours ago 2 hours ago Thu, June 23, 2022 at 10:55 PM, updated 1 hour, 1 hours ago, Friday, June 24, 2022 at 12:06 AM